It doesn’t matter if you need a huge capital or you need a small loan to boost your small-scale business, you need to know some things before applying for a loan.
All businesses apply for loans to either start a business, grow a business or manage a business from crumbling but this is solely for people who want to grow their small-scale business.
A lot of people feel it is stressful getting a loan from a financial house, especially a bank and loans are only given to those who have large businesses.
Before applying for a bank loan, your start-up or small-scale business must be thriving. You can’t just go to a bank to apply for a loan without even having a structure for your small-scale business.
playWhat you need to know before applying for a bank loan (Gettyimages)
A bank would check if you are creditworthy before giving you a loan. You small-scale business should have gotten to a particular stage before you think of applying for a loan.
You also need to know that before applying for a loan, your small-scale business must conform with the goals and interest of the financial house you want to apply for a loan.
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So you really need to study your prospective investors well.
Here are the things you need to know before applying for a bank loan
1. Find out the kind of loans you can access easily
You need to know the kind of small business loans you can easily access before thinking of applying for a bank loan.
Find out if the loan you are about to apply for is a high-risk loan because high-risk loans are best meant for long-term projects and interests start piling up on it the moment you receive the loan.
So you need to be sure of the bank loan you are applying for.
2. Write a well planned out business plan
You will need to convince your prospective investor on why you really need to get a loan for your business. This is where having a business plan comes in.
playWrite a well detailed business plan when applying for a bank loan. (istock)
Write a detailed and well-planned business plan, indicating what your business is all about if your business is thriving and what you want to use the loan for.
3. Financial Records
No bank will be interested in giving out a loan to someone with a bad financial record. Banks want to see how well you manage your finances.
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Banks would definitely want to see your financial records.
So before going to apply for a loan, make sure you have a good financial record. If you don’t you might not get that loan you need for your small-scale business.
4. Collateral
Banks usually ask for a collateral. A collateral is something you pledge as security for the repayment of a loan, which might be taken from you if you cannot pay back your loan.
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Collateral can be a big issue for people applying for loans, especially small-scale business owners but if you are trustworthy, this should not be a problem.
Before putting down something as collateral, you really need to think it through very well.
5. Get a guarantor
You will need a guarantor when applying for a bank loan. A guarantor would stand in for you and would be held responsible if you can’t pay back the loan.
playGet a credible guarantor when applying for a bank loan (Rent.com)
A guarantor gives the bank an assurance that the loan is worth the risk, which can help you with your chances of getting a loan.
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